Stocks moved higher yesterday but on mixed trade. All five major indices closed well in the black with higher beta stocks showing the most strength. The small-cap Russell 2000, S&P MidCap 400 and Nasdaq tacked on gains of 1.3%, 1.2% and 1.2% respectively. The S&P 500 closed up 1%. The Dow Jones Industrial Average lagged on the session, as it rose by a modest 0.6%.

Internals put in a mixed performance. Volume rose 2.3% on the Nasdaq but slid just shy of 1% on the NYSE. However, advancing volume easily outpaced declining volume on both exchanges. By the closing bell, the spread ratio stood at a plus 5.2 to 1 on the NYSE and a plus 2.3 to 1 on the Nasdaq. The higher volume accompanied by the higher advancing volume led to an accumulation day on the Nasdaq. The NYSE did not earn an accumulation day due to the lighter total volume on Thursday for this index.

The iShares Russell 2000 Index ETF (IWM) is now at a critical crossroad, as it approaches resistance of both its 20-day EMA and the lows of its prior trading range. The small-cap index needs to get back into the prior trading range over the next few sessions or it could be in jeopardy of making another move lower. However, also notice on the weekly chart (second chart below) that IWM has, thus far, formed a nice reversal on the week. The weekly charts for all of the other indices are also showing the same reversal pattern. We would like to see the Russell "catch up" to the other indices as this would increase the odds for another move higher. Looking at different timeframes is important when analyzing market conditions.



 

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.